Cash flow planning is the practice of planning and forecasting sources and uses of cash.
Its ultimate objective is to provide a framework that enables the most effective and efficient use of pension and investment income and the maximisation of free cash flow. A cashflow plan can bring greater clarity to the question of suitable investment risk. what if the level of risk is too high or too low to give you a realistic chance of achieving your objectives?
Cash flow planning helps determine the return needed on investments and savings to meet the goals over a given period. It informs the investor how likely they may achieve their goals or whether they need to consider trade-offs, such as saving a little more or changing investment risk, a cashflow plan can also identify the risks which may prevent or delay some goals being achieved.
These include ill health, loss of employment, death of a loved one, investments falling in value, Many of these risks can be managed so that should misfortune strike, there is a plan B to cushion the impact.
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